Hi Hand. This is my first post. There are several ways to play RZ as a long term holding:
(1)Buy the stock
(2)Buy the stock and sell a covered call … either the Jan ’10 2.50 call or 5 call
(a)The 2.50c bid and ask is 1.10 and 1.75. If you sell the call at 1.30, your breakeven point is 0.91 (excluding commissions). If the stock is at 2.50 at options expiration, your return is ~ 175%. You give up the upside above 2.50 but your risk is dramatically lower.
(b)The 5c bid and ask is 0.85 and 1.25. If you sell the call at 1.00, your breakeven is 1.21. Your potential profit is 300% if RZ is at 5 at options expiration.
(3)Set up a call spread … Buy the Jan ’10 2.5 call and sell the Jan ’10 5 call at a debit of .55. Your breakeven is $3.05. If RZ is at 5 at options expiration, your return is ~ 350%.
Some food for thought!
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